Ag Alert May 21, 2025

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some growers to sell land, especially in the San Joaquin Valley. With SGMA projected to force hun- dreds of thousands of acres of farm- land out of production by 2040, land values in parts of the region plummeted during the past few years as it became evident where groundwater pumping restrictions may soon make it unfea- sible to continue growing high-value tree crops. Farmers in these areas have report- ed challenges securing operating loans, as both their crops and real estate—two sources typically used as collateral to se- cure loans—have lost value. “Declining farmland values can put pressure on a customer’s balance sheet and their ability to take on additional debt,” Jelacich said. The lack of operating cash, on top of nu- merous other challenges, has driven some farmers to “pull the plug on the whole thing” and get out while they can still cover their debts, Fernandes said. But that isn’t the whole picture. Real es- tate professionals said plenty of farmers, optimistic that better times may lie ahead, are selling a piece of their farm so they can keep farming the rest of it. “Farmers do a great job of surviving tough times,” Bloomquist said. “Sometimes that calls for drastic measures.” Caleb Hampton is assistant editor of Ag Alert. He may be contacted at champton@cfbf.com.

business,” he said. Today, pressure to yank out vines has left the grape-growing district checkered with barren plots as growers try to balance supply with shrinking demand. The wine industry’s woes have caused wineries to terminate contracts with grape growers and offer rock-bottom prices for out-of-contract grapes sold on the spot market. Last year, a record portion of California’s vineyard acreage went unhar- vested, with grapes left to rot on the vines. This year, without buyers lined up for all of his grapes, “we were cut off,” Berryhill said of his lender’s denial of an operating loan. Other than a harvest loan, which doesn’t cover costs such as pruning, crop protection and other inputs prior to pick- ing the grapes, “we’re operating on our own money,” he said. The scenario has played out this year across California’s winegrape sector. “It’s definitely been a problem,” said Jeff Bitter, president of Allied Grape Growers, a grower-owned marketing group that sells winegrapes for 400 growers across California. “Lenders are saying, ‘Without a contract, we’re going to take a different look at this,’ and you certainly have some lenders saying, ‘We’re not going to look at it at all.’ We’re seeing that now more than we ever have.” A challenging environment Jill Jelacich, American AgCredit head of regional banking for the Central Valley, said the bank understands the cyclical na- ture of the farm economy and has devel- oped lending practices to help farmers get through rough patches. At the same time, she said, Farm Credit system lenders are “required to lend with- in certain parameters” to safeguard the institution, which is cooperatively owned by its customers. “Anything that impacts the ability to generate a positive operating margin” can make it more challenging for the bank to approve a loan, Jelacich said. That can in- clude low crop prices, high input costs and trade uncertainties, among other factors, she said. When it comes to winegrape growers without a winery contract, Jelacich said, American AgCredit considers a borrow- er’s overall financial picture when under- writing operating loans. “That said, having a contracted rev- enue stream does help mitigate risk for our customers,” she added. “If our farm- er isn’t able to sell their grapes for more than the cost to grow, they may be chal- lenged to repay the loan.” Challenges have only mounted for wine- grape growers during the past few years, as each year more long-term winery con- tracts expire, leaving more grapes to com- pete for sales on the spot market. This year, about half the state’s winegrape acreage may be out of contract, Bitter estimated. The current winegrape market “is probably one of the most challenging environments we’ve navigated for de- cades,” Stephen Rannekleiv, a strategist at

A plot of open ground is listed for sale this month in San Joaquin County.

acre vineyard, Berryhill said he sold stock and a nonfarm property his family owned. Fernandes, whose family owns a dairy in Tulare County, said farmers in the area who stored up water credits in recent years and “have more in the piggy bank” are sell- ing the credits to water-starved neighbors to raise operating money. “You weren’t seeing this creativity you’re seeing now five years ago,” he said. Drastic measures In addition to low commodity pric- es and high farming costs, California’s Sustainable Groundwater Management Act has impacted lending and pushed

Rabobank, said in January. Tough decisions

With loans harder to come by for many growers, the need to self-finance has come at a difficult time. Farmers across various commodities have operated at a loss for consecutive years, leaving some with little cash in reserve as they face the prospect, without lender support, of another year in the red. “There are a lot of tough decisions that farmers are having to make right now,” Berryhill said. To raise the cash he needed to continue farming his Clements vineyard, Berryhill sold 22 acres of pinot grigio he owned near Turlock. In other circumstances, the walnuts and almonds Berryhill grows might have helped him get through “tough sledding” in the winegrape market, but prices for those crops have also been depressed. “I’m pretty diversified, but everything was bad,” he said. “It’s the perfect, disas- trous storm.” While liquidating property is always an option for farmers who own real estate, equipment or other assets, agricultural real estate professionals said they have seen a surge this year of parcels across the state being sold to raise money to cover short- term farming costs. “I’ve witnessed it myself,” said Landon Fernandes, an associate at Graham & Associates, who primarily serves Kern, Kings and Tulare counties, with sellers telling him the sale “is going to help me get through the growing season.” Farmers are selling off pieces of their land “so they can live to fight another day,” said Buzz Gill, realtor at Stromer Realty, who works with growers from Merced County to Tehama County. Casey Bloomquist, grower relations rep- resentative at Schuil Ag Real Estate, said he has seen older orchards and water-dis- tressed farmland sold as growers cut their losses and prioritize their best ground. “It’s survival mode,” said Bloomquist, who works with growers in Kern and Tulare counties. Farmland isn’t the only asset farmers are liquidating. In addition to selling his 22-

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16 Ag Alert May 21, 2025

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